J P M O R G A N Asia Pacific Economic Research 22 December 2025 Global Data Watch: Asia China's post-tariff export diversification is broader than presumed No place to hide: China's post-tariff export diversification is broader than presumed A recurring theme characterizing 2025 has been that Chinese domestic demand disappointments have been offset by external sector resilience. Even as US tariffs on China at ~32% are among the highest in the world, China's goods exports have grown by 5% in 2025, in line wi ...

Summary of J.P. Morgan's 2026 China Economic Outlook Industry Overview - The report focuses on the **Chinese economy** and its outlook for 2026, highlighting challenges and opportunities in various sectors. Key Economic Forecasts - **Real GDP Growth**: Expected to slow from **4.9% in 2025** to **4.4% in 2026** [2][5][22] - **Nominal GDP Growth**: Forecasted at **4.0% in 2025** and **4.2% in 2026** [2][5] - **CPI Inflation**: Projected to rise to **0.6% in 2026** from **0.0% in 2025** [2][5] - **PPI Deflation**: Expected to persist, with a forecast of **-1.3% in 2026** [2][5] - **Policy Rate**: Anticipated to remain stable around **1.4%** [2] Core Insights - **Economic Resilience**: Despite trade war fears, China's economy showed resilience in 2025, with exports and fiscal expansion supporting growth [5][6][9] - **Deflationary Pressures**: Production continues to outpace demand, leading to intensified deflation and a decline in nominal GDP growth to **4.3%** [5][7] - **Investment Trends**: Investment growth is expected to recover, particularly in high-tech manufacturing, but real estate investment is projected to contract by another **10%** [5][40] - **Consumption Growth**: Modest consumption growth is anticipated, with limited support from subsidies and transfers [5][26][33] Policy and Structural Changes - **15th Five-Year Plan**: Emphasizes advanced manufacturing and technology indigenization, with a lukewarm approach to services [13][14] - **Fiscal Policy**: A fiscal impulse of **0.4-0.5% of GDP** is expected, with total bond issuance reaching **14.5 trillion yuan** in 2026 [5][66] - **Monetary Policy**: The PBOC is expected to implement measured monetary easing, including rate cuts and RRR adjustments [70][78] Trade and Export Dynamics - **Export Growth**: Expected to moderate to **3.4% in 2026**, with net exports contributing less to GDP growth [49][48] - **US-China Trade Relations**: The fragile truce in trade relations may impact future export dynamics, with tariffs likely remaining elevated [18][20][51] Risks and Challenges - **Downside Risks**: Include potential bankruptcies due to anti-involution measures, further deterioration in the housing market, and renewed US-China tensions [89] - **Upside Potential**: Larger-than-expected fiscal expansion and stronger policy shifts towards consumption could enhance growth prospects [89] Additional Considerations - **Household Consumption**: Remains low due to high savings rates driven by job insecurity and a weak social safety net [30][33] - **Investment Recovery**: Uneven, with public investment expected to outpace private investment, particularly in high-tech sectors [39][40] This summary encapsulates the critical insights and forecasts from J.P. Morgan's 2026 China Economic Outlook, providing a comprehensive overview of the anticipated economic landscape.